The TPE Explained!

There seems to be a lot of confusion about the TPE so I'm going to do my best to explain.

(h) Assigned Player Exception
(1) Subject to the rules set forth in subsection(k) below, a Team may, for a period of one year following the date of the assignment of a Player contract to another Team replace the Traded Player with one or more players acquired by the assignment as follows:
(ii) - If a team's assignment of a Traded Player and acquisition of one or more Replacement players do not occur simultaneously, then the post-assignment Salary or aggregate salaries of the Replacement Player(s) for the Salary Cap Year in which the Replacement Player(s) are acquired may not exceed 100% of the pre-assignment salary (or Base Year Compensation) of the Traded Player at the time the Traded Player's contract was assigned, plus $100 000.

Traded Player Exception: If a team trades away a player with a higher salary than the player they acquire in return (we'll call this initial deal "Trade #1"), they receive what is called a Traded Player Exception, also known colloquially as a "Trade Exception". Teams with a trade exception have up to a year in which they can acquire more salary in other trades (Trade #2, #3, etc) than they send away, as long as the gulf in salaries for Trade #2, #3, etc are less than or equal to the difference in salary for Trade #1. This exception is particularly useful when teams trade draft picks straight-up for a player; since draft picks have no salary value, often the only way to get salaries to match is to use a trade exception, which allows trades to be made despite unbalanced salaries. It is also useful to compensate teams for losing free agents as they can do a sign and trade of that free agent to acquire a trade exception that can be used later. Note this exception is for single player trades only, though additional cash and draft picks can be part of the trade.

Source - Wikipedia (NBA Salary Cap)

OK. So. Essentially what this TPE means for the Raptors is this:
The Raptors are perilously close to exceeding the salary cap this coming season. The greatest repercussion is that the Raptors are unable to build through trades or signings for fear of paying luxury tax. Sending Bosh to Miami through the S&T requires that Miami return salary which matches within 15% plus 100 000 dollars. This value is determined based on Bosh's Base Year Compensation on whichever contract he's under when he's traded. In this case it's going to be his 6-year max deal. However, in the event that Bosh had been traded prior to his last contract expiring, the TPE would have been equivalent to the salary in the first year of said contract.

Everyone still with me? Great!

That's why this S&T works without the Raptors having to take on crummy players. They receive the draft picks which have no monetary value in addition to the TPE which makes the salaries match. Now the Raptors will have exactly 1 year to use their Traded Player Exception.
In terms of using the exception there are limitations. The Raptors may only acquire one player at a time (single-player trades) meaning that they can't use the trade exception on a package of players. Although a team would be able to send draft picks in addition to any said player. Beyond that though, the Raptors are free to split up the trade exception to acquire numerous players. In the event of the trade, the Raptors would send the trade exception to team B in return for player x the benefit being that the Raptors are able to add salary without exceeding the salary cap and paying tax.

There seems to be a lot of confusion about the TPE so I'm going to do my best to explain.

(h) Assigned Player Exception
(1) Subject to the rules set forth in subsection(k) below, a Team may, for a period of one year following the date of the assignment of a Player contract to another Team replace the Traded Player with one or more players acquired by the assignment as follows:
(ii) - If a team's assignment of a Traded Player and acquisition of one or more Replacement players do not occur simultaneously, then the post-assignment Salary or aggregate salaries of the Replacement Player(s) for the Salary Cap Year in which the Replacement Player(s) are acquired may not exceed 100% of the pre-assignment salary (or Base Year Compensation) of the Traded Player at the time the Traded Player's contract was assigned, plus $100 000.

Traded Player Exception: If a team trades away a player with a higher salary than the player they acquire in return (we'll call this initial deal "Trade #1"), they receive what is called a Traded Player Exception, also known colloquially as a "Trade Exception". Teams with a trade exception have up to a year in which they can acquire more salary in other trades (Trade #2, #3, etc) than they send away, as long as the gulf in salaries for Trade #2, #3, etc are less than or equal to the difference in salary for Trade #1. This exception is particularly useful when teams trade draft picks straight-up for a player; since draft picks have no salary value, often the only way to get salaries to match is to use a trade exception, which allows trades to be made despite unbalanced salaries. It is also useful to compensate teams for losing free agents as they can do a sign and trade of that free agent to acquire a trade exception that can be used later. Note this exception is for single player trades only, though additional cash and draft picks can be part of the trade.

Source - Wikipedia (NBA Salary Cap)

OK. So. Essentially what this TPE means for the Raptors is this:
The Raptors are perilously close to exceeding the salary cap this coming season. The greatest repercussion is that the Raptors are unable to build through trades or signings for fear of paying luxury tax. Sending Bosh to Miami through the S&T requires that Miami return salary which matches within 15% plus 100 000 dollars. This value is determined based on Bosh's Base Year Compensation on whichever contract he's under when he's traded. In this case it's going to be his 6-year max deal. However, in the event that Bosh had been traded prior to his last contract expiring, the TPE would have been equivalent to the salary in the first year of said contract.

Everyone still with me? Great!

That's why this S&T works without the Raptors having to take on crummy players. They receive the draft picks which have no monetary value in addition to the TPE which makes the salaries match. Now the Raptors will have exactly 1 year to use their Traded Player Exception.
In terms of using the exception there are limitations. The Raptors may only acquire one player at a time (single-player trades) meaning that they can't use the trade exception on a package of players. Although a team would be able to send draft picks in addition to any said player. Beyond that though, the Raptors are free to split up the trade exception to acquire numerous players. In the event of the trade, the Raptors would send the trade exception to team B in return for player x the benefit being that the Raptors are able to add salary without exceeding the salary cap and paying tax.

Hope that this helps in some way

71. What is the Traded Player exception?

Teams can acquire up to 125% plus $100,000 of the salaries they are trading in a simultaneous trade.

Thanks for the explanation that makes more sense - Can I ask though, If this 'sign-and-trade' goes down, what is the benefit to Miami? Is it simply because Bosh is asking for a max-deal and they need the raptors to fulfill their obligations? Or is there something more?

It may be 125%, I've always understood that salaries need to match within 15% of each other. Apologize if I made a mistake

It's been 125%+100k for as long as I can remember. =)

I need to correct your explanation because unfortunately, you're going to mislead readers with some incorrect information. Hope you don't take offense.

sunndog wrote:

The Raptors are perilously close to exceeding the salary cap this coming season. The greatest repercussion is that the Raptors are unable to build through trades or signings for fear of paying luxury tax.

[...]

In the event of the trade, the Raptors would send the trade exception to team B in return for player x the benefit being that the Raptors are able to add salary without exceeding the salary cap and paying tax

The salary cap and the luxury tax level are two different things. For instance, this year's salary cap will be $58 mil, and the luxury tax level will be around $70 mil. The TPE (explained here) allows us to stay at roughly the same payroll over the cap as last year, despite Bosh leaving for nothing. It does not, as you say, allow us to add salary without exceeding the salary cap (it allows us to add salary *despite* being over the salary cap), and it also does not let us add salary without paying the luxury tax. If our payroll exceeds the ~$70 mil luxury tax level, we will be paying tax no matter what.

Short version: The benefit of the TPE is to allow us to maintain our above-the-cap flexibility despite losing Bosh for nothing.

Thanks for the explanation that makes more sense - Can I ask though, If this 'sign-and-trade' goes down, what is the benefit to Miami? Is it simply because Bosh is asking for a max-deal and they need the raptors to fulfill their obligations? Or is there something more?

The only benefit to Miami at this point is to make Bosh happy. For instance, if BC were to talk to Bosh's camp, and tell him he'd be up for giving him the extra year and bigger raises that come with a S&T, and then Riley says "nope, sorry, won't consider it"... well, Bosh might still sign since he wants to play with Wade above all, but it's probably not something he would want to hear from his new GM.

However, and this illustrates how little leverage BC has now that Bosh has selected one single destination (that has plenty of cap space), if BC were to ask for too much, Riley might just tell Bosh, "hey, we were open to a S&T and giving you more security, but your old boss is being unreasonable and if we acquiesce to his demands, it will hurt our ability to enhance the on-court product down the line with draft picks."

It's a fine line right now, and Miami will probably try to get it done without giving up more than 1 or 2 draft picks.

EDIT: Seems the S&T has been worked out, and is for the 2 draft picks as I guessed (ours and Miami's 2011). The TPE received may be lower than my previously expected $16.67 mil because it looks like Bosh, LBJ and Wade have decided to take less than the max salary possible next year.